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Here at the Motley Fool, we believe that you don't need to rely on Wall Street professionals to do your investment thinking for you. But that doesn't mean you can't learn from the moves that proven money managers are making.

Every quarter, mutual fund managers disclose their holdings to the Securities and Exchange Commission. These 13F filings, named after the section of the law that requires institutions to file them with the SEC, give investors a snapshot into what their managers have bought and sold in the most recent quarter. By looking at the changes managers have made to their portfolios, you can get insight about important prevailing trends in the economy and the financial markets.

And the award goes to...
Bruce Berkowitz is no stranger to fame. After Morningstar named him Fund Manager of the Decade last year, Berkowitz and his Fairholme Fund became household names within the investing community. And with Fairholme having produced a return of 11.6% annually over the past 10 years, the attention investors are giving Berkowitz is well-deserved.

Berkowitz has made some gutsy calls in the past, and this quarter is no exception. Having already drawn attention for his heavy allocation to financials, Fairholme only got more aggressive on the sector at the end of 2010. Fully 82% of Fairholme's assets are in financial stocks.

During the quarter, Fairholme made big additions to his stakes in Bank of America (NYSE: BAC  ) , AIG (NYSE: AIG  ) , and Regions Financial (NYSE: RF  ) . In addition, he boosted his stake in Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) class B shares.

But what's potentially more interesting is what Berkowitz got rid of in his portfolio. The most noteworthy reductions came from health insurance companies Humana (NYSE: HUM  ) and WellCare Health Plans (NYSE: WCG  ) . Humana is now only a token position in the portfolio, while Fairholme owns only half the number of shares of WellCare that it did last summer.

Many have pointed to the health care sector as a good candidate to rebound this year. And more importantly, Berkowitz himself had a strongly positive opinion on the sector in the recent past, as he argued that even with the prospect of health-care reform, the government couldn't replace the work that private health insurance companies were doing. Yet Berkowitz's moves show that he's a firm believer that momentum rests squarely among financials. It's a huge bet, but if he's right, then his shareholders are going to reap some huge rewards for his daring.

Risk and reward
It wouldn't be the first time a big commitment has paid off for Berkowitz. Several smart calls helped him earn the Morningstar award. Fairholme distinguished itself by avoiding the carnage of the tech bust in the early 2000s, instead concentrating on old-economy stocks like Berkshire that many thought had permanently moved out of favor.

Granted, Berkowitz wasn't the only value investor to steer clear of the tech minefield. But when value went out of style in the middle of the decade, Berkowitz didn't get stuck with an out-of-date strategy. Instead, he turned to the beaten-down energy sector, where he reaped some impressive gains. Yet even more impressively, he managed to limit his losses during the bear market year of 2008, with a 30% drop that beat the S&P by 7 percentage points. More importantly for Fairholme, the ensuing market meltdown set the stage for Berkowitz's current big bet on the financial sector.

Walk your own path
As interesting as looking at professionally managed portfolios like Bruce Berkowitz's Fairholme Fund can be, it's only a starting point. To be an independent investor, you'll want to add your own opinions about these and other stocks before making an investment decision. Whether you copy Berkowitz's big push into financial stocks or follow your own investment muse, reading about the moves that other smart investors have made will make you a smarter investor.

Don't panic! Morgan Housel explains why it looks like Warren Buffett is selling these stocks.

Fool contributor Dan Caplinger wants to help you get rich too. He owns shares of Fairholme and Berkshire Hathaway. Berkshire Hathaway is a Motley Fool Inside Value recommendation and a Motley Fool Stock Advisor pick. The Fool owns shares of Bank of America and Berkshire Hathaway. Through a separate account in its Rising Stars portfolios, the Fool also has a short position on Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy went pro a long time ago and never looked back.


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  • Report this Comment On February 16, 2011, at 4:53 PM, TEBuddy wrote:

    I'll ride AIG up to $400 with this guy, we think alike on this one. He will make billions from it, while I will be happy with a few hundred thousand dollars in about 6 years.

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Dan Caplinger
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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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